by HE Liuying
HSBC Holdings has launched a HK$106.2 billion (about US$13.6 billion) offer to take Hang Seng Bank private, paying a 33% premium to minority shareholders to streamline its Hong Kong operations and manage rising property exposure.
The offer, announced on Thursday, values Hang Seng at HK$155 a share, about 33% above its 30-day average, and would give HSBC full ownership for the first time since it acquired a 51% stake during Hong Kong's 1965 banking crisis. The transaction will be funded entirely from internal resources.
Hang Seng shares jumped 25.88% on the news, while HSBC fell 5.97% as investors weighed the premium against near-term capital pressure. Hang Seng's first-half results showed mounting strain from Hong Kong's property slump, with non-performing loans climbing to 6.69% from 6.12% at the end of 2024 and total impaired loans reaching HK$55 billion. Expected credit losses rose to HK$4.9 billion, driving a 30% drop in net profit to HK$6.9 billion.
KANG Shuiyue, chief investment officer at Danyang Investments, said Hang Seng remains a solid franchise, but the property downturn has clouded its outlook. Full ownership, he said, would give HSBC greater flexibility to manage assets and credit risks internally and avoid the constraints of minority shareholders.
The move also fits Chief Executive Georges Elhedery's drive to streamline HSBC's global structure. Since taking the helm last year, Elhedery has reorganized the bank into four business lines and sought to speed up decision-making in key markets such as Hong Kong.
Elhedery described the transaction as "a growth investment," saying it is unrelated to Hang Seng's credit losses. He said the deal would leave Hang Seng's brand, customers and staff unchanged, while allowing faster decision-making and closer integration between the two banks. Hang Seng would keep its name and branch network as the two sides expand cooperation in technology, talent and product development.
Under the proposal, minority shareholders would receive HK$155 a share, valuing Hang Seng at HK$290 billion (about US$37.3 billion), or 1.8 times book value, well above local peers. The deal would cut HSBC’s common equity Tier 1 (CET1) capital ratio by about 125 basis points from 14.6%, prompting a three-quarter pause in share buybacks as the bank rebuilds its capital.
The deal still requires court and shareholder approval. It must win support from at least 75% of minority shareholders, with fewer than 10% voting against. HSBC expects to complete the transaction in the first half of 2026.
Founded in 1933, Hang Seng Bank serves about 4 million customers. Kang said the buyout may increase HSBC's short-term exposure to Hong Kong's property market but should ultimately strengthen its profitability and control across Asia. He added that the decision also reflects HSBC's confidence in Hong Kong as a global financial hub and a long-term bet on Hang Seng's growth potential.
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